ICI unveils pounds 3bn war chest for acquisitions

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The Independent Online
ICI yesterday revealed a war chest for acquisitions of between pounds 2bn and pounds 3bn. The chemicals giant said it would be "comfortable" raising gearing from its current minimal level to more than 40 per cent "for the right acquisition". Sir Ronald Hampel, chairman, said that would give it between pounds 2bn and pounds 3bn in terms of firepower, pointing out that when the group bought the US group Stauffer in the 1980s, gearing exceeded 50 per cent.

Although ICI gave no indication that it had any big target in its sights, the current level of gearing means it could comfortably absorb Hanson's chemicals business, expected to be valued at around pounds 3.5bn under the demerger plans recently announced by the conglomerate. A share buy-back is also on the agenda, the group revealed.

The comments came as ICI unveiled pre-tax profits more than doubled from pounds 408m to pounds 927m in the year to December, just below the pounds 1bn made at the peak in the 1980s. Although at the bottom end of expectations, the market drew comfort from indications that chemicals destocking evident in the second half of last year may have come to an end. Sir Ronald said: "We believe that the underlying economic fundamentals continue to look solid and, after a slow start to the year, world demand should pick up... The first quarter has begun with trading profit at a similar level to last year."

The shares ended 25p up at 857p, helped also by confirmation that the new chief executive, Charles Miller Smith, is to drive ahead with a cost- cutting programme unveiled last year.

Mr Miller Smith said the plans, set to deliver pounds 400m annual benefits to the bottom line by 1997, would be followed by "another programme of the same magnitude to take us to the year 2000." He said return on capital, which was raised from 10 per cent to 18 per cent last year, remained unacceptable in terms of the target of 20 per cent across the cycle.

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